Media, telecoms may see new rules / Consumers also to be affected by FCC's changes

Jonathan Krim, Washington Post

Published
4:00 am PST, Monday, January 6, 2003

During the next few months, a single federal agency will begin to fundamentally alter the nation's communications and mass-media landscape, rewriting a broad swath of rules that affect the choices consumers have for getting online and the variety of television and radio programming they watch and hear.

If all of the changes being reviewed by the Federal Communications Commission are enacted, major telecommunications and media corporations will be less regulated and more free to grow than at any time in decades.

The rules in question govern how much telephone companies need to open their lines to competitors for local phone and high-speed Internet service, set restrictions on how many TV and radio stations one company can own, and determine whether a company can own newspapers and TV stations in the same community.

FCC officials say they expect to begin making decisions as early as February, after more than a year of intense debate and lobbying over sharply different visions of the best way to spur growth and competition.

Opponents of the proposed rules fear that, taken together, they could lead to a few powerful conglomerates controlling the flow of electronic information,

from programming television and radio news and entertainment to owning the pipes that connect people to the Internet.

Those pushing for the changes argue that the old rules fail to account for emerging technologies that can provide a wealth of diverse information and means of communication. Burdensome regulation has stunted the introduction of many new technologies -- particularly high-speed Internet access -- these people say, and this in turn has hampered the economic recovery of the battered technology sector.

With the stakes high, the corporate owners of three of the nation's major TV networks came together last week to ask the FCC to abolish its ownership rules. Viacom Inc., which owns CBS and the Paramount movie studio; News Corp., owner of the Fox TV network and the 20th Century Fox studio; and NBC/Telemundo argued that the regulations are no longer needed given the "wealth of media available to virtually all Americans."

CHAIRMAN LIKELY TO PREVAIL

Proposed rules often are modified through negotiations among the commission's five members, and FCC officials insist that final decisions have not been made. But analysts are increasingly convinced that the deregulatory agenda of Chairman Michael Powell will prevail, marking a definitive turn from FCC policies during the Clinton administration.

Powell and Republican commissioners Kevin Martin and Kathleen Abernathy have a 3-to-2 majority. While they don't always vote in lock step, they generally agree that less regulation is good.

Although the FCC is an independent agency, Congress controls its purse strings. Taking over the Commerce Committee is Sen. John McCain, R-Ariz., who championed Powell's nomination to the commission in 1997 and who shares his deregulatory instinct.

The commission's regulatory regime also has been under attack by the courts,

which have issued key rulings challenging the FCC's requirements on the sharing telephone networks and its limits on media concentration.

In an interview, Powell rejected the notion that he seeks mindless deregulation or that the contemplated changes would shift the media and telecommunications balance in dramatic fashion.

Powell said he is determined to keep the Internet relatively free from the decades-old, tightly regulated framework of local telephone service. He also disparages claims that changing FCC rules will lead to consolidation that will stifle competition.

"The most important thing the Powell commission will do is eliminate all the rules that prevent telecommunications and media companies from entering new lines of business," said Blair Levin, an FCC official in the Clinton administration who now analyzes regulatory policy for the investment firm Legg Mason Wood Walker Inc. "We are clearly going to have a lot of consolidation. The question is, is the nature of technology such that we can still get the vibrant competition that you would want?"

FEAR OF LESS COMPETITION

Paul Misener, vice president of global public policy for Amazon.com Inc., who also worked at the FCC, said the direction the FCC is headed creates the likelihood that while consumers will have a choice between high-speed Internet technologies -- via cable or souped-up telephone service known as DSL -- there will be only one or two Internet providers within each technology.

Consumer groups have called on the FCC to require the cable and phone companies that provide broadband connections to be required to allow other Internet service providers -- such as EarthLink Inc. or United Online Inc. -- onto those systems.

The pipe owners want no such requirements, but America Online Inc. and Time Warner Inc. had to accept them as a condition of merger approval in 2000.

Powell said that providing choice for Internet service is vital for consumers and that the commission is still mulling the issue. But the question,

he said, is whether the pipe owners should be required to allow other providers on their systems, or whether they will have enough market incentive to negotiate deals with other providers on their own.

That question is at the heart of the broader argument over how best to nurture and encourage competition in the digital world.

Proponents of deregulation say that owners of infrastructure, such as cable and telephone networks, cannot be expected to invest in new technologies and ultra-fast fiber-optic lines if they are forced to share their facilities with or lease them to competitors.

The other side argues that only by requiring owners of monopoly networks to compete will they have incentive to invest in new services and expand their revenue opportunities. To do otherwise would force many competitors out of business, these people say.

LEASING LINES TO RIVALS

In passing the landmark Telecommunications Act of 1996, Congress forged a patchwork filled with compromise. But it required the regional phone companies to open their networks to competitors to provide local service and high-speed DSL Internet access.

Under the Telecommunications Act states have the power -- based on FCC rules -- to set the lease rates that the phone companies can charge competitors to use the equipment needed to provide local service.

Recently, however, several states have moved aggressively to lower the lease rates, and long-distance companies have made significant inroads into localservice markets, winning customers from the former Baby Bells.

Nationwide, regional competitors provide about 8 million customers with local phone service, up about 40 percent from a year ago. As a result, costs to consumers have dropped as the Bells have been forced to compete.

The phone companies want to be treated in the same fashion as the cable operators, which are not required to offer competing services on their broadband networks. Only then, the phone companies say, will they have the incentive to extend fiber-optic lines to homes.

Commissioner Michael Copps, a Democrat, worries about changing the broadband rules, but he is so incensed about proposals to ease limits on media ownership that he has threatened to hold public hearings on his own around the country.

Under the proposals, a newspaper and a radio or TV station in the same market could be owned by the same company. The commission also is considering lifting rules that bar one company from owning more than one of the top four TV stations in a market, raising the limit from 30 percent to as much as 45 percent on the number of total viewers nationwide that one cable system can serve, raising or abolishing the limit that prevents one company from owning or controlling TV stations that reach more than 35 percent of households nationwide, and ending the ban on the major networks being merged.

A rule that bars one company from owning more than eight radio stations in the largest metropolitan areas also is under review.